Evertec(EVTC) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2024 was approximately $212 million, an increase of approximately 22% compared to Q3 2023 [7][18] - Adjusted EBITDA was approximately$ 87 million, an increase of approximately 11% year-over-year, with an adjusted EBITDA margin of 41.3%, which is approximately 420 basis points lower than the previous year but above expectations [7][19] - Adjusted earnings per share was $0.86, an increase of 8% from the prior year [7][19] - Year-to-date operating cash flow was$ 185 million, with approximately $92 million returned to shareholders through dividends and share repurchases [8] Business Line Data and Key Metrics Changes - In Puerto Rico, Merchant Acquiring revenue increased approximately 12% year-over-year, driven by higher sales volume and spreads [9][20] - Payments Puerto Rico revenue was up approximately 2%, influenced by growth in ATH Mobile and POS transactions [9][21] - Business Solutions segment revenue increased approximately 8%, attributed to projects with Popular that have gone into production [9][24] - LATAM segment revenue was up 65% year-over-year, primarily due to the Sinqia acquisition, with a one-time revenue from GetNet Chile impacting results [12][23] Market Data and Key Metrics Changes - The macroeconomic environment in Puerto Rico remains stable, with employment up 1.9% year-over-year and a low unemployment rate of 5.7% [10] - Travel and tourism trends in Puerto Rico are positive, with international airport arrivals up approximately 19% year-over-year [10] Company Strategy and Development Direction - The company has closed the acquisition of Grandata, enhancing its product offerings and relationships with key fintechs in Latin America [14] - Cost efficiency initiatives are being executed to offset the anticipated impact of a 10% discount on certain MSA services starting in October 2025 [11][32] - The company aims to maintain competitive pricing and drive business growth despite the upcoming discount [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects in both LATAM and Puerto Rico, despite facing currency headwinds [28][34] - The company expects revenue growth of approximately 21% to 22% year-over-year for 2024, with adjusted EBITDA margin expectations between 39.5% to 40% [28][31] - Management highlighted the importance of ongoing modernization and re-pricing initiatives to enhance margins and revenue growth in the Sinqia segment [40][49] Other Important Information - The company has a strong liquidity position with approximately$ 469 million as of September 30 [8][27] - The company has committed to a scholarship program in Puerto Rico and Latin America, awarding approximately $1.4 million over ten years [15] Q&A Session Summary Question: Insights on pricing power and volume trends - Management noted that pricing initiatives have been implemented, but some will anniversary in Q4, and volumes have remained consistent without significant acceleration [36][37] Question: Details on the Grandata acquisition - Grandata specializes in leveraging behavioral data for credit risk insights, particularly in Mexico and Brazil, and complements the company's existing issuing platform [39] Question: Update on Sinqia's performance - Management highlighted three focus areas: re-pricing contracts, modernizing platforms, and margin optimization, which are expected to drive growth and improve margins [40][49] Question: Cost initiatives to offset MSA contract changes - The company has identified cost-cutting measures to offset the anticipated$ 18 million impact from the MSA contract changes, ensuring margin stability [42][52] Question: Client attrition in LATAM - Management acknowledged some client attrition due to regulatory changes and other factors but remains optimistic about growth driven by Sinqia and Grandata [58] Question: Capital allocation strategy - The company plans to be opportunistic with share repurchases, maintaining flexibility in capital deployment strategies [60]